Fraud Detection and Prevention Market Assessment, By Service [Professional Service, Managed Services], By Fraud Type [Identity Fraud, Investment Fraud, Payment Fraud, Others], By End-user [Banking, Financial Services and Insurance, Retail, IT and Telecom,

Fraud Detection and Prevention Market Assessment, By Service [Professional Service, Managed Services], By Fraud Type [Identity Fraud, Investment Fraud, Payment Fraud, Others], By End-user [Banking, Financial Services and Insurance, Retail, IT and Telecom, Healthcare, Others], By Region, Opportunities, and Forecast, 2017-2031F

Global fraud detection and prevention market is projected to witness a CAGR of 20.03% during the forecast period 2024-2031, growing from USD 31.00 billion in 2023 to USD 133.52 billion in 2031, due to the factors such as growing complexity of cyberattacks and the rise in online fraud.

Fraud prevention and detection are an integral part of a comprehensive anti-fraud strategy. These two serve different roles in fraud risk management. Fraud prevention attempts to avoid incidents of fraud beforehand, and it emphasizes developing proactive measures and controls, authenticating techniques, authorization processes, and awareness of fraud training. It is normally proactive and involves higher initial investments as it deploys preventive technologies and systems. Fraud detection deals with the determination and mitigation of fraud that has occurred. It depends on transaction monitoring and analysis for deviation from normal behavior. Hence, it uses techniques such as data analytics and anomaly detection algorithms to find suspicious patterns. Fraud detection is reactive as it responds after the incident of fraud that has occurred, sometimes with incremental costs related to investigation and remediation.

These strategies create the most robust mechanism against fraud by balancing proactive measures with reactive analysis, preparing to protect against and respond to fraudulent activities. Further, various countries across the globe are incorporating strict regulatory frameworks to address fraud detection and prevention. For instance, the European government has introduced the General Data Protection Regulation (GDPR), whereas the United States of America brought the California Consumer Privacy Act (CCPA) to ensure a high standard of data protection. These regulatory frameworks are fueling the fraud detection and prevention of market demand and growth.

Moreover, developing countries, such as India, are putting efforts to bring innovation within the fraud detection and prevention market. For instance, in August 2024, the launch of an AI fraud detection system was part of the Indian government’s broader initiative to enhance the security of financial services sector. This move is in response to the rapid digitization of financial services and increased adoption of online banking.

AI And Machine Learning (ML) Technology is Revolutionizing the Market Demand

The emerging AI and ML technologies are marking a complete revolution in the fraud detection and prevention market, owing to their advanced capabilities in offering much-improved speed and accuracy. AI and ML systems analyze enormous volumes of data at incredible speeds, thus enabling them to identify complex patterns and anomalies that might be troublesome to detect with traditional methods. These technologies make use of predictive analytics to predict and prevent possible fraud in advance. For example, machine learning algorithms analyze historical data to identify subtle behavior patterns indicative of fraud and continually refine their detection mechanisms as fraudsters discover new ways to do their work.

AI-driven systems tackle fraud prevention by using a suite of advanced authentication techniques, such as biometric verification and adaptive security measures, to defeat fraudulent attempts before they can be executed. In this respect, the systems achieve continuous learning for refining strategies so that they remain ahead of threats that become ever more sophisticated. AI and ML amplify fraud detection through real-time monitoring and analysis. For that, machine learning models are capable of detecting abnormal patterns or deviations from predefined rules, hence flagging suspicious cases against fraud more effectively than their static rule-based counterparts. This capability offers much quicker response times and far more accuracy in identifying suspicious activities while reducing false positives for improved security.

Therefore, organizations are achieving dynamic and proactive fraud management by combining AI with ML to significantly improve their potential to detect or prevent fraud with high accuracy and speed, which is driving the fraud detection and prevention market. Currently, as per Judgement Media Ltd, which is a prominent online marketing education company, 77% of devices being used have some form of AI and is projected to contribute USD 15.7 trillion to the global economy by 2030.

Growth in Organizational Complexity and Unstructured Data is Proliferating Market Demand

The fraud detection and prevention market has been growing at an exponential rate, majorly driven by increased complexity in organizational structures and an exponential proliferation of unstructured data. Companies, while expanding their businesses to geographic extents, go through an increased challenge in managing and securing diversified data across emails, social media interactions, transaction records, and others. It, in turn, requires advanced fraud detection capabilities that are equipped to handle unstructured data in large volumes.

Most organizations are seeking tech-savvy technologies that can be seamlessly integrated into their existing systems and provide real-time intelligence at the pace of ever-escalating methods. Thus showing a novel increase in demand for fraud detection and prevention solutions.

Rising E-Commerce and Online Payment Trends is Driving the Market Growth

Significant growth in the fraud detection and prevention market is being driven by the surging volumes of e-commerce and online payment transactions. For instance, as per Hostinger, in 2023, approximately 2.64 billion consumers were doing online shopping. With the global population estimated at about 8 billion as of January 2024, this data suggests that over 33% of individuals worldwide are engaged in e-commerce, reflecting a 5% growth compared to 2022.

The growing shift of consumers towards digital platforms for shopping and performing financial transactions is increasing the volume of online transactions immensely, thereby creating fertile ground for fraudulent activities to flourish. It, in turn, promotes increased e-commerce and online payments with advanced fraud detection systems capable of protecting sensitive financial information from malicious activities.

As these transactions continue to go online, fraudsters manipulate this opportunity with more sophisticated means of taking advantage of those digital vulnerabilities in current payment systems. Businesses and financial institutions, therefore, are investing in advanced fraud detection technologies to monitor evolving threats.

Moreover, it is becoming important for companies to adopt intense fraud prevention measures due to regulatory imperatives and consumer expectations of securing online transactions. With the projected further growth in e-commerce and online payment platforms, the demand for enhanced fraud detection and prevention solutions is foreseen, consequently driving innovation and investment in the fraud detection and prevention market.

High Volumes of False Positives Restraining the Market Growth

High volumes of false positives in fraud detection and prevention systems are significantly hindering the fraud detection and prevention market by creating customer experience issues, increasing operational costs, and causing revenue loss. For instance, according to a report by Nuspire, LLC, 70% of IT security leaders have noted that the number of security alerts received daily has more than doubled in the past five years. Additionally, around 90% of security teams feel overwhelmed by false-positive alerts, which do not represent genuine security threats, necessitating investigation.

Frequent false alerts upset customers, potentially leading to transaction abandonment and reduced trust in the service provider. This increases operational expenses due to the need for additional customer support and diverts resources away from addressing real fraud threats. Moreover, high false positive rates impact a company’s reputation and lead to regulatory scrutiny, making potential customers cautious about adopting such solutions.

Asia-Pacific to Hold Significant Share of the Market

The rising number of data breaches and cyber security in Asia-Pacific is highlighting the urgent need for advanced fraud detection and prevention solutions and services. Governments across the world are implementing regulatory frameworks to control fraud detection and prevention in the region. For instance, in the most recent edition of BioCatch Ltd., a company that deals with the enterprise of real-time fraud detection and prevention, highlighted mobile malware as the top threat facing banks in Southeast Asia going into 2024 in its Digital Banking Fraud Trends in Asia-Pacific.

Future Market Scenario (2024 – 2031F)

Advancements in artificial intelligence and machine learning are expected to drive the fraud detection and prevention market in the forecast period. These advancements are anticipated to improve accuracy and fraud detection systems through complex algorithms and analytics, reducing false positives and enhancing real-time identification.

Multi-factor authentication (MFA) is anticipated to be more prevalent in the forecast years, owing to the advanced standard security measures.

More emphasis on real-time fraud detection is expected in the forecast period, wherein, organizations will be investing more in technologies that can offer immediate analytics and responses about suspicious activities.

The fraud detection and prevention market may face challenges due to high cost. As advanced fraud detection systems using artificial intelligence and machine learning are highly expensive to develop, implement, and maintain. Therefore, small and medium enterprises may face financial burden.

Key Players Landscape and Outlook

Key players are making huge investments in new products and services to increase their market presence. For instance, in March 2024, Visa Inc., introduced AI powered risk and fraud prevention tools. Similarly, in June 2024, Oscilar Inc., launched an AI powered ACH fraud detection product, utilizing machine learning algorithms, generative AI, and real-time data analysis to avoid fraudulent transactions.

Furthermore, firms are integrating multiple fraud detection solutions into their platforms to offer a more advanced solution. Additionally, many companies are strategically forging partnerships and pursuing acquisitions to expand their presence and share. For instance, in August 2024, Rippleshot and CPI Card Group announced a strategic alliance to integrate Rippleshot’s advanced fraud prevention services into CPI’s offerings. This collaboration aimed to improve fraud management, reduce associated costs, and boost customer retention and satisfaction.

Also, in March 2024, Fidelity Information Services, a global player in financial technology sector, announced that its SecurLOCK card fraud management solution is aimed to significantly improve the accuracy of identifying and preventing fraudulent card transactions through a new collaboration with Stratyfy, a graduate of the FIS Fintech Accelerator program.

In May 2024, Swiggy Pvt. Ltd., the online food delivery platform, announced its partnership with SHIELD AI Technologies Pte. Ltd., a device-first risk AI platform, to strengthen its fraud prevention and detection capabilities. This strategic collaboration is designed to tackle promotional abuse and counter fraudulent activities in Swiggy’s Delivery Partner network.